Wisdom of crowds and mass delusions

Ideally the decisions of a government are rational but the idea of rationality is abstract. In practice there are competing interests and choices to be made between them as well as unknown outcomes of proposed ideas. Despite rationality should be something to strive for rather than catering interest groups at the expense of good ideas. Sadly no form of government was ever perfectly rational as the rationality of a government tends to reflect the rationality of the people in it. This is also true for democracy.

The quality of decisions in democracies depends on how large groups of people form their opinions. In this respect there are two opposing ideas, the wisdom of crowds and mass delusions. The wisdom of crowds was first discovered in 1906 by Francis Galton. He was visiting a livestock fair where an ox was on display. Villagers were invited to guess the animal’s weight. Nearly 800 people participated in the contest. No-one guessed the weight of 1,198 pounds exactly, but the average guess of 1,197 pounds was almost perfectly right.

At least in specific cases groups of individuals on aggregate assess a situation quite good and better than nearly every individual on his or her own including experts. The average guess included the extremes on both sides. Galton was impressed. He came to believe that this was an argument in favour of democracy. One can argue from this discovery that if all views are reflected in parliament, it can result in good decisions.

The wisdom of crowds depends on individuals having different backgrounds and making their assessments independently so that they look at the issue in different ways. The more people are alike or the more they influence each other, the more they can become prone to group think so that the wisdom of the crowd disappears.1 In extreme cases this can lead to mass delusions like stock market bubbles.2

Diversity of opinions is a reasons why decision-making in democracies can be better than other forms of decision-making. Ideally, in a democracy all information is freely available to everyone. Mass delusions are a reason why democracy can fail. The greatest mass delusion humanity is suffering from currently is not dealing adequately with the limits of our planet. It is a fact that our planet can’t support our life styles for much longer. Democracies have difficulty dealing with this brutal fact.

The reason is that the required measures affect us all directly and significantly. They require considerable sacrifice, while we won’t feel the consequences of our inaction right now. Most people have a short-term bias and value the present more than the future, most notably a distant and uncertain future. And no country can take action alone as that wouldn’t make a difference. That is why people do not make the necessary changes and either ignore the facts, prepare for the worst or hope for a miracle.

1. The Wisdom of Crowds. James Surowiecki (2004). Doubleday, Anchor.
2. Extraordinary Popular Delusions and the Madness of Crowds. Charles Mackay (1841). Richard Bentley, London.